Pat Leahy examines the impact a Left-led government might make on the economy and concludes . . . well, I’m not quite sure what the conclusion is. Indeed, I’m not any wiser about what the impact might be. He does ask the relevant question:
‘But what does the advocacy of a left-wing government actually mean? Does it mean simply that people don’t like the current government, or is there a characteristic left-wing alternative in gestation? And what would such a government do about the principal – in some ways, the only – question of the day: the economic crisis?’
Good question. To my mind, one of the most important questions. The problem is that Leahy treats us to a discussion on taxation and, while this is an important sub-component of economic strategy, it is only a part, not the whole. In short, if I thought the whole debate over the policies of a Left-led government boiled down to where we shift the incidence of taxation, I’d say it’s not worth the effort.
I don’t blame the various individuals quoted in the article – representing the broad spectrum of the Left. When the questions are framed within a set of restrictive parameters, it’s hard to break out and address the core issues of the crisis. Leahy (and I don’t think this is being unfair to him) is one of many, the majority in fact, who believes the crux of the debate is about what combination of tax increases and spending cuts need to be implemented to reduce the fiscal deficit. As it happens, I don’t. The debate should be about generating economic growth – saving and creating jobs while stimulating spending and investment. And when you look out at the world around us there is only one agency that can do that at the moment – the state.
So, while Leahy treats us to a sometimes surreal discussion – how much tax must be imposed, definitions of ‘well-off’, protecting public serivces that were starved of resources even before this recession kicked-in (concluding with that totally discredited McDowellist-line of juxtaposing efficiency and equality) – there are different, outside-the-orthodox-box responses to be made:
‘Mr. Leahy, the first thing a Left-led government will do is massively roll-back the levies on all incomes save for the highest – slash both the income and Health levies. That’s what a Left-led government will do.’
Now Pat’s teeth may fall out if he hears this from a high-tax, high-spend leftie – but then there’s that report from his same newspaper about falling retail spending.
Emperian, a global information services provider, has calculated that while in January the number of people visiting shops fell by 0.8 percent compared with the previous January; falling by 3.8 percent in February – the number fell by 8 percent in March.
'Mark Mullally, property services manager at Experian, said that the increased income and health levies in the budget earlier this month would exacerbate the situation for retailers, as people would have less disposable income.'
Exacerbate might be an understatement.
Moving on, Leahy, after he picks up his teeth, will then ask – If you’re going to reduce levies, you’re going to have to cut spending; what would you cut?
‘Actually, Mr. Leahy, a Left-led government would do just the opposite. It will increase public expenditure – considerably. It will generate jobs in the public sector and, through public procurement, in the private sector. It will invest in infrastructure and public services. It will subsidise jobs to prevent redundancies. It will pursue wage and income maintenance strategies to stimulate demand. It will dare to spend, borrow, invest and lend.’
I can see Pat’s hand reaching for his mobile to ring the emergency psychological hot-line service for his interviewee. But he won't resist one more question – How can this be done? We can’t afford to borrow anymore. In that name of all that is holy, what are you talking about?
(sigh) 'The Government tell us we can’t afford a stimulus programme because it would mean higher borrowing, which we allegedly can’t afford. But they’re increasing borrowing because of rising unemployment. And they’re proposing a massive borrowing splurge to bail out the banks. So, we can borrow to maintain people on the dole and buy worthless assets. But we can’t borrow to put people back to work and invest in productive assets.' (shrug)
Once we step outside the narrow, deflationary parameters imposed by the orthodoxy, we can conceptualise an alternative programme for the economy. We must first, however, take that step. The Left has good instincts, the better instincts, but for some reason it hesitates to act on them.
Late last year, Labour called for a major stimulus programme and has consistently made the point that the fiscal deficit is the result of economic contraction and rising unemployment, not the other way around. Sinn Fein launched a comprehensive job-creation and training policy document. Such investment programmes would cost billions. This is what almost every other industrialised country, large and small, is doing in one form or another – growing, not deflating economies.
However, in the run-up to the budget, everything got terribly foggy. Labour stated, in its pre-budget submission:
'This deficit is unsustainable, and a major fiscal correction is required.'
From this, Labour argued for a deflationary approach, albeit far less than what the Government had been rumoured to be considering. Nonetheless, the bottom line figures – in terms of borrowing – ended up being rather similar. Sinn Fein produced a range of ‘fiscal’ measures to reduce the budget deficit but still ended up pretty close to where the Government ended up.
The proposals that each party made were far, far better than what the April budget produced: the tax increases focused on higher income groups and wealth, rather than reducing the disposable incomes of low and average income groups. In this respect, it was progressive. However, both parties failed to integrate their stimulus expenditure costs, which would in the short to medium term substantially increase Government spending, into their proposals for the April budget.
No question that progressives must argue for fiscal consolidation measures as part of a total package of economic investment. Those measures must limit the deflationary effect. But at the end of the day, any stimulus programme will cost. For example, a minimal programme would cost 2 percent of GDP – or €3.5 billion. There is no getting around or hiding the fact that calls to increase investment to save and create jobs will mean a higher deficit in the initial stages – more borrowing, more borrowing costs. Neither party factored this in.
The Left’s arguments for stimulus investment and fiscal measures are disconnected. They hang separately, not together. I would suggest this is not because Labour or Sinn Fein, the trade union movement or progressives in general, accept the deflationary programme proposed by Fianna Fail and supported by Fine Gael. They don’t. In fact, they know it won’t work.
Unfortunately we have, so far, failed to integrate the fiscal and the expansionary into a self-support stimulus strategy, failed to start the difficult, challenging work of creating a macro-economic alternative. Because of that, we are trapped, unable, unwilling to step outside the parameters laid down by the deflationary orthodoxy.
Realising this, knowing that our instincts are correct, is a start. It’s not a substitute for work but it is a motivator. Unless we begin this work, however, and step outside the trap, we can talk all night about realignment, political cooperation, a new progressive front that challenges the conservative political consensus for the first time in history.
But come morning time we still won’t have anything to say.
Notes on the Front 
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